A Royal Bank of Scotland branch in central London. Photograph: Shaun Curry/AFP/Getty Images

UKFI has the task of making sure the state's holdings in the banks are managed in the interests of the taxpayer – not in the electoral interests of the Labour party, not in the financial interests of investment bankers at Royal Bank of Scotland, and not in the interests of chief executive Stephen Hester and the board. The grandstanding over bonuses suggests that core aim is in danger of being forgotten: both sides need to calm down.

Despite its rhetoric, the government knows full well there is concern about keeping talented bankers at RBS when their CVs are pouring through rivals' letterboxes – not only to bring in new business, but also to unwind the toxic legacy so that the taxpayer emerges alive from this ordeal by banking. Equally, the RBS board knows there is a legitimate issue over high pay at a bank that has received enormous taxpayer support. The directors must also be aware that the resignations they threatened would turn them into pariahs – the men who refused to save RBS because they were not allowed to indulge the greed of their colleagues.

Realpolitik dictates that, however distasteful it is, some bankers will have to be handsomely compensated to keep them on board, but that doesn't justify increasing the overall pool from £1bn to £1.5bn. The bank needs to be highly discriminating and exercise judgment on which individuals are really worth paying to keep.

Bank bonuses are predicated – I refuse to say "earned" in this context – on virtually free money bestowed by central banks. They are not the reward for great talent. Short term, a clawback for the taxpayer, say a windfall tax on bonus pools, with the proceeds earmarked for child poverty or youth unemployment, would be a popular measure. Longer term, Lord Myners is right to say this is a failure of ownership. Shareholders should be protesting against obscene bonuses; like former Federal Reserve supremo Alan Greenspan in a different context, I'm baffled by their deficiency of self-interest. In the longer term RBS also needs to be broken up and returned to a domestic high street operation.

Excessive bonuses are the victory of corporatism – the enrichment of managers and senior employees – over capitalism, which should ensure they are competed away. The monkeys are still running the zoo.